Jens F. Laurson: I write about politics, culture, and economics. At various times I have worked with the CATO Institute, written for the Washington Post, contributed to Washington's Public Radio Station, and made tasty sandwiches on Capitol Hill. My bent is libertarian, my background European, my passion classical music and its economics. For an essay on the late-romantic composer Hans Rott in Listen Magazine I won a 2012 ASCAP Deems Taylor Award.……………………………………………………………… George Pieler: I write extensively about taxes, budgets, philanthropy, technology and culture. After stints on Capitol Hill (Reagan Revolution) and the Education Department (school choice), I co-founded DC's private voucher program and consulted for several market-oriented think tanks. As a practicing lawyer I parse words carefully and take the Constitution seriously. I like my markets free and my government limited.

On Government Spending, It's Time For Short-Term Thinking

When it comes to spending control and deficit management, it’s long-term thinking, stupid. Or so we are always told and ready to believe, plausible-sounding as it is.

‘Long term’ essentially means the 10-year planning horizon of U.S. budget law. When House Speaker John Boehner and President Obama failed to reach agreement on budget goals in the 2011 debt limit standoff, it was a failure to agree on that long-term kind of budget trajectory.

Things have not improved, but attitudes seem to be evolving. A flurry of op-eds and think-tank analyses in recent weeks make the argument that 1: the U.S. doesn’t really have a spending problem, 2: if anything America should spend more, to goose the economy, 3: only reforms to long-term entitlements and welfare programs are needed (assuming defense spending continues its downward trajectory)… and further that those shouldn’t take effect until the recovery is more secure. As the Financial Times’ redoubtable Martin Wolf puts it, “The risk is that accelerated fiscal stringency, at a time of zero interest rates, will depress the economy more than improve the fiscal outcomes.” Mr. Wolf also argues the U.S. has been rather restrained on spending under Mr. Obama.

That latter is only plausible if you look at the 2008-2009 TARP-followed-by-huge-spending-stimulus as a “Bush problem” for which Mr. Obama deserves no blame (or credit). In fact TARP was a bipartisan agreement in the midst of the presidential election campaign, and the Obama stimulus was passed strictly along party (Democratic) lines. Coming off that crisis-high, spending may seem restrained. Much of that is due to defense drawdowns, though, and federal spending remains at a peacetime high, well in excess of 22% of GDP. Worse, even with the so-called “budget sequester”—the ‘automatic’ spending cutbacks that modestly restrain appropriated spending—taking full effect this spring, it will remain at that bloated level for the foreseeable future.

But the sequester has one baked-in-the cake advantage: It doesn’t require further legislative action. Yes, it a blunderbuss to the budget, instead of a scalpel. A thoughtful review of budget priorities would be nicer, but with politicians unwilling or unable, that’s not an option. Especially since the Senate has ignored its budget-law duties for three years, the sequester is a breath of fresh, chilling air. One must hope that the request by President Obama, right after failing to deliver his budget by the legal due-date, to defer the sequester (‘balanced’ with tax hikes) will be shot down.

In truth, when the powers that be can’t produce a long-term budget , the short-term thinking of a sequester looks pretty good. The cuts of the sequester will cause some disruption and are overweighted against national defense, but they are hardly colossal: about $100 billion a year, while deficits alone exceed $1 trillion on a regular basis. And any cuts now are a gift that keeps on giving, with helpful compounding effects in outyears unless they are erased or undone by future legislation (always a good bet, but the bird-in-the-hand rule should apply here).

A few near-term nicks in those entitlements would do a world of good for the same reasons, and might get more respect from financial markets: Reducing fraud rates in the ballooning food stamp (“SNAP”) program, requiring a modest co-pay for jobless benefits and training programs; cutting slush funds like the Community Development Block Grant… these and other ideas (The Congressional Budget Office has plenty to offer) make policy sense, will build savings over time, and wouldn’t entail major policy changes. The point is that small cuts now are worth a lot more than hypothetical cuts over a longer term, particulaly since pledges from this Congress and President can’t bind future political (mis)leaders.

This long-term obsession has brought some very puzzling analysis. Over at the American Enteprise Institute, John Makin and Daniel Hanson suggest not to worry too much about the U.S. debt-to-GDP ratio, then turn around and warn against letting the sequester take effect because, ironically, it would raise the debt-to-GDP ratio by slowing the economy. They don’t seem to have similar concerns about the January 1 tax hikes (nor does Mr. Wolf), mostly aimed at savings and investment, the most growth-oriented sources of personal income.

Makin and Hanson prefer the “Bowles-Simpson” approach, named for the Presidential Commission those gentlemen led, a “framework” (as they call it) “for fiscal sanity”. Yet that framework wouldn’t come into play for some years after enactment, and as noted above, can’t bind future Congresses: A paper tiger without legislative teeth. It would also leave federal revenues at a permanent level of 22% of GDP (maybe more), well above the post WWII average that is believed to be consistent with solid economic growth.

Let’s not fall into the long-term-or-nothing trap. A bit of short-term action for fiscal restraint does quite a bit more than endless long-term theorizing. Or op-ed writing.

George Pieler is an attorney and free-lance writer. Jens F. Laurson is Editor-at-Large of the International Affairs Forum.

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fir some bizarre reason, Forbes has decided to goad moderate Republicans into forcing the country into a new recession, just to prove a faulty ideological point.

Why it has given up its position as a rational voice in exchange for howling like the most malevolent T-party-nik is hard to understand; unless, that is, it is losing its rational business-oriented subscriber base and is looking for fields to plow among the lunatic fringe.

Memo to forbes – they don’t pay for subscriptions, so you may get readers, but you’ll go broke doing it

[JFL:] Our suggestion — and frustration — addresses a universe in which the most likely available alternative is worse than the sequester, not a theoretical ideal which we think rather unlikely. We agree that the ideal is to be preferred (obviously), and we might very well agree considerably in how that would look. But compared to the alternative of doing nothing or worse, we suggest this sequester bears more benefits than (exaggerated) perils for the economy.

This year’s sequester is way, way too small to affect this year’s growth, certainly less likely to do so than the tax hikes Obama put in place January 1, most of which should be of much greater concern to the ‘business reader’. If you have an alternate set of facts you want to share please do, and we will read with interest.